The Great Greek Bank Robbery

Since 2008, bank bailouts have entailed a significant transfer of private losses to taxpayers in Europe and the US. The latest Greek bank bailout constitutes a cautionary tale about how politics – in this case, Europe’s – is geared toward maximizing public losses for questionable private benefits.

ATHENS – Since 2008, bank bailouts have entailed a significant transfer of private losses to taxpayers in Europe and the United States. The latest Greek bank bailout constitutes a cautionary tale about how politics – in this case, Europe’s – is geared toward maximizing public losses for questionable private benefits.

In 2012, the insolvent Greek state borrowed €41 billion ($45 billion, or 22% of Greece’s shrinking national income) from European taxpayers to recapitalize the country’s insolvent commercial banks. For an economy in the clutches of unsustainable debt, and the associated debt-deflation spiral, the new loan and the stringent austerity on which it was conditioned were a ball and chain. At least, Greeks were promised, this bailout would secure the country’s banks once and for all.

In 2013, once that tranche of funds had been transferred by the European Financial Stability Facility (EFSF), the eurozone’s bailout fund, to its Greek franchise, the Hellenic Financial Stability Facility, the HFSF pumped approximately €40 billion into the four “systemic” banks in exchange for non-voting shares.

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The problems the Greek banks had and will continue to have are beyond the control of managements. Banking as a business relies on a certain degree of financial resilience, but given that leverage is the main source of revenue for traditional banks (as were the Greek ones) the kind of resilience one needs when an economy hits a very sharp downturn, combined with a sharp fall in the market value of its Treasury holdings (of course when Greece entered the EUR area, its banks should have opted for more diversified collateral (say Bunds) and as they might have had private information on various aspects of government policy and misleading government accounting, they should have reduced their reliance on the Greek economy, sold their loans to the market and replaced them with an EU market portfolio, in time for the inevitable bust. That is what a privately owned bank would have done, if its government would allow it to get away with that. I agree that these banks should have been nationalized, or maybe put into a trust overeen by Greece's main creditors.
But of course the normal way to handle things in a country with a clienteles culture and a very large stock of offshore private wealth with little loyalty to the political entity Greece would be to deal with the -again inevitable- parasites. What else would Dr YV propose here?

The lessons for Greece and also Europe are simply that underpaid politicians are no match for competent and mobile investors and that it is time the various political audiences are told that this is what comes with living in an affluent (compared to Zimbabwe for instance) society. The Chinese have known this for at least a millennium and have not been able to come up with a solution except occasionally completely ruining the national economy and watching a fresh crop of investors slowly emerge . That is not an option for democratic politicians. Maybe the technocratic superstructure of the EU?EUR is the thing that smoothens the conflict between mobile predators and stationary free- option- writers (weak governments) a little by limiting the scope of government largesse. But the corollary is then that the needy do not get help either..

It's not just Greece that's got a problem, the EU in general is not a good place to invest, and this was proven once again by the latest forced recapitalisation of the Greek banks - wiping out existing foreign and local shareholders. Now, not even the Greeks themselves want to buy their own, heavily discounted bank shares. The one thing that Greece needed was good business people to run their banking system, so what does the EU do? They force those existing bank shareholders to raise new capital thereby diluting the value of their existing shares by over 97% and wiping them out. So the EU bailed out the Socialist Greek government but killed the capitalist bankers who did not cause the crash in 2015, and were only trying to help - was that clever? Punishing the shareholders as if they were responsible for the problems caused by the new Greek government - that, I find is very bad EU policy and shows that the EU is quite clueless. First the Greeks and now the EU - everyone is tearing at the carcass - it's like the wild west. Having wiped out the bank shareholders, we now have Mr Varoufakis accusing those very same shareholders of robbing his Greek banks, when in fact it's the other way around - they lost everything thanks to him. This represents a serious warning for all those thinking of investing in Europe. In Europe there are the long established rich, the government elite and their cronies, and the rest are jealous, envious and derive pleasure from others misfortune, not understanding who the real enemy actually is. Greek people will say I'm a capitalist who took a gamble in Greece and lost. But the way the EU has dealt with this year's Greek crisis tells me Europe in general is not worth a gamble. Every time there is another problem somewhere in Europe, more "animal spirits" will be killed off. Yes, I've lost a little in Greece this year, but it's the EU that may well end up losing a lot more in the future. The EU is like a pack of hyenas tearing at each other, and this Greek bank saga of 2015 shows that any foreigner tempted to invest in the EU may well end up with a few pieces missing in the end. My advice, don't invest in Greece and don't invest in the EU - in the long run it will make you, as well as Mr Varoufakis happy. The EU will eventually be a wonderful tourist destination for the rest of the world, but not much more. The greatest thing lacking in Europe is common sense and that will never change. I have accepted my 2015 Greek loss and I'm glad it's over, but I fear the EU and Greece will not be so lucky, for them it won't be over for a long time. Mr Druckenmiller might be right - the Euro is headed for 80c to the dollar. There are reasons for that. All the best for 2016 to you all- Greece, the EU and Mr Varoufakis.

The TARP bailout has become the model for how to deal with improvident behaviour. After this mistaken policy initiative, the real need for discretionary fiscal expansion was denied because of the unwillingness to add to the burden created by TARP. Therefore, the banking sector was allowed to continue to behave badly whereas the hoi polloi just had to make do with little and less.

'Never before have taxpayers contributed so much to so few for so little'

.. and related comment which appears to be referenced to robber baron capitalists. The problem in Greece is twofold; firstly questionable politicians; secondly the EU structure and responses

I think you will find that the EU taxpayer will ultimately end up wearing this particular albatross because there is a limit to the blood than can be extracted from Athenia stone

Anyway, to return to our glorious leader the EU which is the root of your problem IMO for it castrated any freedom of corrective action. The neverending reaction from the Ministry of Love at central EU is more centralisation. Its reaction seems remarkably North Korean at times, and like Orwells Aminal Farm all steps are of course in the occupants best interest even if sovereignty aka known as individual freedom is compromised

In any consortium, I hestitate to call the EU a union, there will be different needs and wants. It is inevitable that there are imbalances and the benificiaries of those imbalances will not want any change in the status quo. This is what Greece has run up against. No significant change to rules and their implementation is tolerated. Like a game of PacMan routes are closed.

In this madhouse if the imbalances are damaging to one party but not the majority - the main players or an active lobby group of players veto anything that jeopodises the status quo. Thus a minority of voters in one location can crucify the voters in another location to preserve their advantage. In fact a power bloc of voters in one country can veto. That poer bloc is tiny as a percentage of the EU population

So your problem as such is not the Troika, it is the entire basis of the club you joined as a minor player.

This wolfpack device will turn on anybody opposing the status quo beneficiaries, with sheep being wolves and wolves being sheep in turn as the issues fruit

So with Greece one issue was the eurozone inherent imbalances. Porous borders and neverending migration will be the next. With the UK unsustainable EU citizen migration will be the issue. Evidently the new development is Moldova - non EU - citizens can easily obtain Romanian pasports and thus can migrate freely to the UK. Any attempt to regulate this unforeseen development will of course be opposed by other parties who consider they benefit from the status quo

This is all very Roman, as in Roman Empire, which is actually where most of our European laws and institutions originated. However you should consider the Romans were vicious and brutal and that is part of the DNA of the structures inherited. Dacia (Romania) was subjected to genocide to seize their gold to name just one event. There is a whole list of them, some 'First Amongst Equals' actions included

Why any democracy would want to subjugate itself to this mechanism is beyond me. Why when presnted with an escape route the Greek reaction of 2015 is to want to be caged and displayed like Vercingetorix is also beyond me

But like the Roman Empire the EU will fail unless it fundamentally changes the way it works, which so far seems to be beyond it. Even the building of walls to keep the uncivilised out is eerily reminiscent of Hadrian building his wall in AD122

#Itisacoup #it_was_a_coup after all.
My question is ,why did you not come clean towards the Greeks?
Why did you not (as government) speak out,speak the truth and ask the Greek people to help you decide ,(if that was too difficult for you,despite the 60% minimum support you had at the time from all greeks.)
Instead,the games were played behind closed doors again,and of course we lost.
You lost too.But more importantly,the greek people lost their belief to a left government ,their hope for a wind of change.
Instead ,we are left with a pinocchio government and the potential for a right wing/fascists rise...well done!!
Why did you not just walked away from the Eurozone ?How harder could it have been for greeks,a grexit at a time that the whole world was behind us,looking and realising what the banksters are doing.
What were the chances the international vultures would not get scared by the spread of the message that they are the enemy,and they want to ban democracy and freedom.
Why did you not raise your voices and why did you not take Greece out of the wolves pit?
Why did you accept to play with their rules,when you had a clear indication that Greek people want you to do something different...at least those who voted for you.

Instead ,you took our votes,and use them for continuing the policies of the past.
In front of a confrontation with the capitalists ,you chose to run,to bow down ,to give up ,to sell us short....

Maybe some doubt your good intentions.
I never did.
But i doubt your commitment to your words.Yours and Tsipras.
If you really wanted you would look behind you and see the sea of support you had at the time.
If you wanted you could have asked for a new europe ,and demand respect.
Not succumb to the first obstacle,to the first blackmail that you should be expecting anyway .....
wasn't syriza who was saying how prepared they are (before the elections)?how they have solutions?...Next time,i will not believe anyone.
next time....what next time?
There are no politicians seems able today to stand up for their beliefs....chicken shit politics..
The only defence we have left ,is to forbid the IMF vultures to enter the country ever again,write off all debt,and print our own currency...
Those who want imports can wait ...
as for exports,these would bring a lot more this way...
And unemployment has no chance to go down anyway ,not in a million years.
And this applies everywhere not only in Greece.
Growth has ended.for good.
So if we are really serious,we should be planning our future economy and society,without taking into account the dying breeds of the vultures or the dying system they re trying to maintain at all costs.
Soon ,no matter how much money you have,it wont be able to feed you.
Not unless you grow your own food.
General revolt against greed and globalisation is what can ,and will save us all...

Syriza, and with the referendum that was held, had a clear mandate of 66% of the total Greek voters to say “OXI” to the bailout deal. The traitors led by Tsipras decided to ignore the will of the Greek people.

In 2012, most if not all of the Greek banks' recapitalisation requirements originated from their holdings of Greek government bonds which they then agreed to tender in the PSI - private sector involvement in debt forgiveness. In 2015, the banks have again been recapitalised, at the private sector's expense and almost full dilution of the HFSF's 2012 investment, as a direct consequence of the policies of the Syriza government, with no small contribution of the first Syriza minister of finance. If ever there was a case of the private sector bailing out the taxpayer then the Greek banking sector exemplifies it.

Greece has to leave the Euro. Its just been put back. You cannot have a common curency are without ongoing wealth transfer rich to poor.

All Greece has is a debt transfer and asset firesale

Greece has porous borders so the closed border to the North will remain

The idea a neighbour with an even worse porous border will solve the migrant problem is a joke

Greece is a zombie state, everytime there is a blood transfusion the vampires will return to feed

Greece had the opportunity for a euro coup de gace but opted for Lingchi

Tsipras - who to be fair is handling a mess left to him - appears to not understand the limits of what he can do. Actions made the Greek debt problem worse. Actions made the migrant problem worse and Greece is now being used as a giant holding depot

Finally, I understand Greece is slowly sliding under the sea geophysically. The other problems are man made this is not. I have sympathy about this. In short the problem, as usual it would seem, is politicians not economics. People talk about sticky prices and sticky wages but the real problem is sticky politicians

.
This reads like an economic problem but it is really a psychology problem.

Psychology problem 1)
Why do the Greeks still desire the euro?

As currently administered it has inflicted severe depredations. Does insecurity trump logic? Only the euro has brought Greece to all this unpleasantness.

Psychology problem 2)
Why is the euro, which could be a great thing properly administered, administered do poorly?

There is no compelling reason for all these unpleasantries. Properly administered the euro could have smoothed over most of it. The problem seems to stem from a northern anal-retentive monetary philosophy in conflict with a southern permissive monetary philosophy.

It is said that to this day, the core of the Roman/Byzantine Empire's region exhibit a different psychology from the Northern European territories. This psychological incompatibility, if not overtaken by wisdom, make continue to make the euro unworkable,

If wisdom fails to overtake the north, the result may be that what is really needed is a northern euro for the monetarily anal-retentive north and a southern euro for the monetarily permissive southern core of the old Roman/Byzantine Empire territories.

Restore the Empire - monetarily.
.

PS - note that I make no judgement on the northern or southern approaches - I only observe their incompatibility.

"Never before have taxpayers contributed so much to so few for so little." You should realize that money is false, because it is not an object of nature. Money neither grows on a tree nor can be mined from underneath the earth. This false money must be free and abundant at its source which is the ECB. How can you create something true using something false like money? Get rid of money. Do something to create money-less economy (MLE). It cannot be necessary to run a real economy using such a false money. It is possible to run the same economy in the exact same way without any kind of money. Take a look at MLE implementation methods at https://theoryofsouls.wordpress.com/category/c-ch3-moneyless-economy/

Most official numbers show that the US public didn't loose money at the banks bailout (TARP bail out) but rather made a small profit e.g http://projects.propublica.org/bailout/list/category/Bank. I speculate perhaps Mr. Varoufakis, possesses the "correct" numbers and figures yet for some reason he chooses to not disclose it to the public.

Helping any country or individual can only by giving charity without any return...
Loans are not bailouts. They further push deeper in debt..
If I am in difficulty, I should not take loans, I should manage with existing resources..

Why does your government throw money at the Banks? They go bust, let them go bust as some other company will take them over (or bits thereof) Leman Bros is a typical example. You pay the banks with a loan from somewhere and it is the public that has to pay this money nack. Thus the government is stealing from the tax payer. Tsipras has not behaved properly and has totally misled the electorate. I understand, take the money from Europe and deal with the consequences later. Later in Greece will never come!!!! It is thus not the Great Greek Bank Robbery, it is the Great theft of public money!! Banks (the Greek ones) are an enterprise, have shareholders, etc. so I cannot see why they are so important to the Greek economy.

Until everyone stops meddling in the affairs of Greece (starting with the Germans and the Americans) and until such time the Greeks decide to grow up and elect some trustworthy people to represent them and to work for them and for no one else, it would be highly irresponsible for anyone to invest even one cent in Greece.

This is what happens when business is given freedom to take over 'common assets' of the people. It is happening everywhere. There needs to be a general pushback against allowing business to own things that are a necessity - security, military, electricity, water, health, banks, press and the internet come to mind as the most dangerous. Failure to push back will result in almost every country ending up like Greece with a small business elite living like they do in the Hunger Games.

I am aware of all that - but we are referring to different things. Ownership and management of common assets are not the same thing - business is much better at managing things - but giving them ownership results in an 'rent seeking' relationship. If you read to the left, Greece's government gave up ownership and retained management of the banks - when what was really needed was that they retain ownership while outsourcing management to business who is more efficient. There is a line between government and business, and when it get crossed in either direction bad things happen - in poor Greece's case it has breached these limits both directions.

So in summary, I am not preaching socialism, as even the most capitalist countries in the world retain ownership of certain common assets - e.g. the police force in America is owned by the Government, it could theoretically be privatized but even a young child would see the error in that.

@Michael Public
I am not sure if you know where Greece is or why it's in such a poor shape but if you do some research you'll find that it has had one of the most interventionist governments in Europe.

In fact socialist Greek governments regularly intervened in just about any and every industry in the economy (especially ship building, mining, financial services etc) and the state still has an abnormally large number of assets, which ('common assets' or not) it manages extremely poorly.

You are a menace to society! You are either deceitful, or stupid, or both. You accuse the foreign hedge funds of grabbing 74% of Greek bank equity for a mere 5 billion euro in November. But, last year these same foreign investors bought Eurobank shares at 30c each, and now, after you wrecked the Greek economy in just 9 months, Eurobank (like the other 3 banks) has had to issue new shares at just 1c each to raise more capital. That wiped out all existing shareholders (like me, and the hedge funds). Did you buy these new Eurobank shares at just 1c each Mr Varoufakis? Any Greek can still now buy them for about 1c - in fact they have been trading below 1c for a few weeks. (Because there were so many Eurobank shares, they did a 1 for 100 swap to bring the price per share up from 1c to about 1 Euro now, but that changes nothing - what the hedge funds bought last year, any Greek or foreigner can now buy for one-thirtieth of the original price). Why did the price actually drop 10% after these new shares traded on the Greek share market, and after the hedge funds "grabbed them so cheap"? All Greeks had the opportunity (and still do) to buy their own Greek bank shares at less than what these hedge funds just paid for them in November!! Greeks won't buy their own shares, but you want to criticize foreigners game enough to take the risk (a second time) and try to help Greece. Greeks can grab equity now at less than what the hedge funds paid last month! The truth is not even the Greeks want to buy their own entire banking system for just 5 billion euro! I hope all Greeks are not like you. Your misleading comments tells me nothing has changed and nothing will change, and Europe, in general, is not a good place to invest.

You don't explain why you invested in Greece. Could it perhaps be there were 'higher respected returns' - obviously. But what you never failed to ask was why there was higher than expected returns. It was because it was not so much an investment as a rape and pillage expedition. In your own small way, you funded what happened in this article, and regular people will suffer because of it. You can justify all you want that you are an otherwise good person but in the end you made a socially irresponsible investment motivated by greed. There is a tongue in cheek saying that "God punishes small crimes immediately".

Dear Hans and Michael, for your information I studied for six years at Uni to become a senior high maths and physics teacher - what have you done for the community? Thanks for your concern but, no I was not wiped out at all, just made a one-off silly mistake investing in Greece. If you like "common assets" why not move to North Korea? Europe will still have it's hands full in the future trying to deal with Greece and people there like Varoufakis.

All of this is not just happening since yesterday or since 2008. It's been going on for centuries. The Final Chapter started in 1913 with the Federal Reserve Act. All is carefully scripted, orchestrated, and planned. All wars are bankers' wars. You have to look for the big, the real BIG players in this game. Wherever you go, you encounter governments of robbery. Let's put down our differences, people, and let's get together. Let us awaken peacefully to this nightmare.

Dear Yanis, back in June, I wrote the following comment on one of your articles on PS: “Greece has been looted throughout its history by internal and external forces. The Elgin Marbles, amongst others, are one classical example. These so-called bailout loans are being portrayed as if everyone is doing Greece a favour whilst the sad reality is the exact opposite.” What you stated in your article everyone knew, regrettably nothing changed since the Greek general elections of January 2015. Your dear comrade decided to join a long line of traitors and the northerners shall be voting themselves very soon fixed pensions, at the expense of the Greeks. Sad, very sad indeed.

Just one more piece of evidence that the Eurozone is little more than an extortion ring, run for the benefit of the Germans and their neighbors, with the European Central Bank as the enforcer.

Recall that Ireland was placed in a similar position, when Jean-Claude Trichet, the then head of the ECB, wrote to the Irish government (in a letter that was kept secret at the time and only surfaced in 2014) that it would refuse to act as a clearing house for Irish business if Ireland did not accept a bank bail-out.

Since a shut-down of banking services threatened the utter collapse of what was left of Ireland's economy, the Irish gave in and saddled themselves with a prodigious debt that they are still laboring to discharge.

You could make a movie about all this. Call it "The Godfather, Part IV."

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